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Advantages:
Lower transaction cost:
this comes due to inter transactions between subsidiary companies who usually have a central management and a central communication system which is cheaper to use.
High certainty of Quality:
this comes about since the subsidiary companies have a common quality control system as such they produce standard products as such the companies are sure of their products' quality.
Ability to monopolise the market:
This type of situation will start from the production of raw materials all the way to production, then distribution. This will assist the company to control all the lines of business as such controlling Entrants to the same business - hence control against competition.
Disadvantages:
Higher Monetory and Organisational Costs.
This can be brought about by a company having a big organisational structure whic leads to higher cost for managing such a structure.
Wiki User
∙ 14y ago
Vertical integration involves a single company controlling and managing multiple stages of production or distribution. Advantages include cost savings, better quality control, and increased efficiency. Disadvantages can include increased risk, potential conflicts of interest, and reduced flexibility in responding to market changes.
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